Shipping firms make profit from… selling ships

Though shipping fees have increased by 10 percent over the previous year, shipping agents still cannot earn much money from shipping services, while their profit mainly come from ship trading.

Shipping fee increases cannot help much

Production companies said that domestic shipping fees are now higher than international shipping fees. It is very difficult to find service providers at this moment, because the number of ships is limited, while the demand is increasing.

Forwarding companies have said the domestic shipping fee has increased by 10 percent in comparison with the last year, while it is expected to increase by 10-15 percent further in the high year-end season, though the volume of goods will not increase significantly. According to Dang Tan Phong, Director of SCM Vietnam, the volume goods going through the company has decreased by 5-8 percent over the previous year. The shipping fee increases are considered “reasonable”, because the crude oil price has climbed to over $80 per barrel in the world. However, Phong said domestic shipping firms still cannot meet the demands in service quality.

Experts say the current capacity of domestic shipping firms is sufficient to meet the domestic demand while they do not have to compete with foreign firms. In general, the shipping firms which exploit domestic routes have to exploit short-distance routes to Thailand or Singapore to use up all of their capacity.

However, some shipping firms said that the big disadvantage for domestic shipping firms is the inconsistency of the volumes of goods which depends on the seasons and weather. Therefore, though the shipping fees are high at certain times, they are not high enough to bring fat profits to shipping firms, and many domestic shipping firms have fallen into difficulties.

According to representative from Vosco, the expenses on sea transport are heavily dependent on the fuel prices. Meanwhile, the oil price has been increasing steadily in the world market.

There are nine container shipping firms which are providing services on domestic routes. Of these firms, Vinalines holds 40 percent of the market share, while the remaining market share is being held by Vosco, Bien Dong, Vinafco, Vinashin Lines and Gemadept. The enterprises have experienced an unprofitable year.

The financial report for the third quarter of 2010 of Saigon Maritime showed that the company incurred a net loss of 8.31 billion dong in the first nine months of the year. The third quarter alone witnessed the loss of two billion dong because of higher expenses. Meanwhile, Dong Do Maritime Joint stock Company said it incurred a pretax loss of 16 billion dong in the third quarter of the year.

In general, shipping firms now can only make modest profit from shipping services.

It’s more profitable to sell ships

According to the report by Vosco, the pretax profit of the enterprise reached 116 billion dong in the first nine months of the year. Of this amount, shipping services brought the turnover of nearly two trillion dong. Especially, the ship trading brought more than 97 billion dong.

Similarly, Vinaship got 31.1 billion dong in the first nine months of the year. The sale of three ships worth more than three million dollars were a major contribution to the company’s profit.

Vitranschart has said that the turnover in the third quarter of the company increased by 155 billion dong. Though the shipping fees increased significantly in comparison with 2009, the enterprise said that the profit is equal to 69.2 percent of that of the previous year, due to the increasing expenses. There has been no figure about the profit the company earned from the sale of a ship worth $2.8 million. However, it is clear that the sale has made a large contribution to the 12 billion dong profit of the company.- Saigon tiep thi

Tags: Vietnam Shipbuilding industry